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Know the differences between a Home Equity Line of Credit and a Home Equity Loan

As a homeowner, you may choose to use your home’s equity to secure a loan or line of credit as an affordable and convenient way to access funds for various needs. But you may be wondering what the differences are between a Home Equity Line of Credit (also known as a HELOC) and a Home Equity Loan. When choosing between a HELOC vs. a Home Equity Loan you’ll want to understand the basic distinctions between these personal financing options to pick the one that fits your needs.

What is a Home Equity Line of Credit (HELOC)?

The money you have invested towards owning your home (your home’s equity) used as security for a type of revolving credit line. With a HELOC from Great Western Bank you:

  • Are given access to funds with an agreed credit limit.
  • Can access these funds via check or Banker.
  • Are only charged interest on the funds you use.
  • Can choose between a variable or fixed interest rate.
  • Can access Home Equity up to 90% Loan to Value (LTV).
  • Will have a defined draw period but can apply for renewal upon expiration.

What is a Home Equity Loan?

Your home’s equity used as security for home equity loans. With a Home Equity Loan from Great Western Bank you:

  • Will receive the entire loan amount in your account at loan close.
  • Will pay a fixed interest rate with a consistent monthly payment.
  • Can access Home Equity up to 90% Loan to Value (LTV).
  • Are an ideal option for debt consolidation needs or one time purchases.
  • Be given a repayment period of up to 20 years for the loan to be paid in full.

As you weigh the differences between the two products, you may want to also consider the following.

A home equity loan charges interest at a fixed rate and most home equity lines of credit charge interest at a variable rate. Fixed interest rates provide predictable payments which allows for a stable repayment schedule over the life of the loan. Variable interest rates are based on a standard index and will fluctuate based on factors affecting the U.S. economy. Variable interest rates for HELOCs will follow this standard and may change as your line matures.

Another difference between a HELOC and a Home Equity Loan is how the money is received. A HELOC is set up as a separate account in which you can withdraw funds as needed. While a Home Equity Loan is dispersed as a lump sum, meaning, the entire loan amount is deposited into your preferred account.

Find the best personal financing product for you

When choosing between a HELOC or a Home Equity Loan, you may find that HELOCs are better suited for expenses not set in stone like when funds are needed for making several purchases during a project. While Home Equity Loans are great for when you have a definite amount to pay such as a one-time large purchase.

Speak with a banker near you today to find the solution that best fits your needs.

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